TY  - JOUR
AU  - Cheung,Yin-Wong
AU  - Chinn,Menzie D.
AU  - Fujii,Eiji
TI  - Market Structure and the Persistence of Sectoral Real Exchange Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7408
PY  - 1999
Y2  - October 1999
UR  - http://www.nber.org/papers/w7408
L1  - http://www.nber.org/papers/w7408.pdf
N1  - Author contact info:
Yin-Wong Cheung
Department of Economics
University of California
Santa Cruz, CA  95064
E-Mail: cheung@ucsc.edu

Menzie D. Chinn
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI 53706
Tel: 608/262-7397
Fax: 608/262-2033
E-Mail: mchinn@lafollette.wisc.edu

Eiji Fujii
School of Economics
Kwansei Gakuin University
JAPAN
Tel: 81-798-547257
E-Mail: efujii@kwansei.ac.jp
AB  - We examine the relationship between market structure and the persistence of U.S. dollar-based sectoral real exchange rates for fourteen OECD countries.  Our empirical results based on disaggregated data suggest that differences in market structure significantly determine the rates at which deviations from sectoral purchasing power parity decay.  Specifically, industries with a larger price-cost margin are found to exhibit slower parity reversion of their sectoral real exchange rates.  Further, as the degree of intra-industry trade activity increases, sectoral real exchange rate persistence becomes more pronounced. These findings imply that an imperfectly competitive market structure contributes to the well-documented persistence in real exchange rates.
ER  -